MLM Debt: How to Avoid Debt in Network Marketing

Today, we’re going to take some time to discuss MLM Debt.

This is a weird subject to write about. It’s almost taboo. Many people act as if MLM is a “bad thing” because some distributors go into debt to build their business. Do these critics say the same thing about traditional business owners who can easily rack up six or seven figures in debt growing their businesses? Of course not.

To be honest with you, not everyone who does MLM goes into debt because of their business. Some people actually make money! They might not become top earners, or make substantial amounts of money, but it doesn’t mean they are losing money. And some people leverage this industry to get out of debt!

More importantly, a large percentage of the people in the United States are already in debt BEFORE joining the our industry. Just to give you some perspective, here are a few facts about consumer debt in the USA.

Facts About Consumer Debt in the USA

Here’s the truth. Most people are broke. They do not have much money saved in a retirement account or emergency fund, and if they lost their job and stopped getting paid they would be bankrupt in less than a month. How crazy is that? Even though the USA’s economy is strong, most people are burdened with large amounts of consumer debt. Here’s a few quick interest facts about debt in the USA.

Total U.S. consumer debt is at $13.86 trillion. That includes mortgages, auto loans, credit cards and student loans. ~ Source:

The average American now has about $38,000 in personal debt, excluding home mortgages. That’s up $1,000 from a year ago, according to Northwestern Mutual’s 2018 Planning & Progress Study, which also reports that “fewer people said they carry ‘no debt‘ this year compared to 2017 (23 percent vs. 27 percent).” ~ Source:

ValuePenguin found that more than 40% of all US households carry credit card debt, with the average American household carrying a balance of $5,700. For only indebted households, which excludes people who pay their balances in full every month, the average debt is $9,333. ~ Source:

To put things in perspective, I don’t blame people for being in debt. Few of us are ever taught how to manage money. We don’t learn it in school or college. In most cases we learn about money by watching our parents. Sadly, they are in the same situation as us, because they weren’t taught anything about money either. It’s like the blind leading the blind.

mlm debt

Debt with Entrepreneurs

Furthermore, starting a new business of any type is typically quite expensive.

According to the U.S. Small Business Administration, most micro-businesses cost around $3,000, while most home-based franchises cost $2,000 to $5,000 to start. While every type of business has its own financing needs, experts have some tips to help you figure out how much cash you’ll require. ~ Source:

Do me a favor. Drive around your city or town and look at all the closed down stores, restaurants, and strip malls. Do you think those entrepreneurs lost money and went into debt? Heck to the yeah! Many of them spent $10,000 to $100,000 or more just to open their business. Plus, they spent substantially more to keep their business operating each month. Is anyone calling their business or industry a scam? Nope. And if you purchased a franchise, you could EASILY spend six or seven figures just to get started.

As I see it, network marketing offers a low cost way to start a business for the average person. With most network marketing companies, you can join for $300 or less. This means you have minimal financial risk.

Why Some MLM Reps Go in Debt

The most common reason some MLM reps go into debt (because of their business) is because they do not manage their money wisely. They are not doing enough money producing activities to generate revenue in their business, and they are wasting money on unneeded expenses.

If you build your business the right way, you should NEVER go into debt. EVER.

That’s the true beauty of our industry.

Your business expenses here should be minimal, no more than a few hundred dollars per month, including your product purchase. If you aren’t making that much money in your business, you are honestly doing something wrong (or not putting in the work). Just by servicing a few retail customers, you should earn enough commissions to cover your product purchases and business expenses.

How to Avoid MLM Debt

So, how do you avoid MLM Debt? Thankfully, it’s not rocket science. You only need to do a few things.

Maintain a Few Customers

Without customers, there is no business. All businesses need customers. Network marketing is no different. Every rep should maintain anywhere from 5 to 10 retail customers per month. If that is ALL they ever did in their business, the commissions from those customer purchases should more than cover ALL business related expenses. If you don’t know how to find customers, get some coaching with your successful upline. Read a few books on selling. It’s honestly not that difficult to do, if you try.

Update Your Profit & Loss Statement

As an entrepreneur, it is your responsibility to be a good steward of your money and your business’s money. You should maintain a profit and loss statement each month. This lists your income and expenses, so you can keep a close eye on your revenue and expenses. You can identify trends and look for areas to improve. Some people use Quickbooks. You can also use a ledger or an Excel spreadsheet, like I use.

Keep a Separate Checking Account

When you own a business of any type, it’s important to keep your business and personal finances separate. You should have a separate checking account for your network marketing business and you should use that account to pay your business expenses. This will save you a ton of time at tax time. Plus, it will keep your spouse from nagging you.

Treat it Like a Real Business

Want to stay out of debt? Treat your network marketing business like a real business. Instead of treating it like a hobby like most people do (hobbies cost money), do the things you know you SHOULD be doing, and do them daily. If you aren’t approaching at least 5-10 new prospects every day, I’d argue you don’t even have a business, you have a hobby! This is a business of exposures. Your business won’t grow, and you won’t make any money, if you aren’t consistently approaching new prospects five to six days per week.

Be a Good Steward of Your Money

Be a good steward of your money! Everyone should be. Never spend money in your business just to spend money. Before you spend money on something, ask yourself what type of return on investment you can potentially expect from that expense.

mlm low start up cost

If You Have MLM Debt

If for some reason you do have MLM Debt, you should do two things. First off, stop racking up more debt. Cut up your credit cards if necessary and stop spending on unneeded expenses. Evaluate each expense you have in your business to see what you can eliminate. Make the decision to take control and be a good steward of your own money.

Next, come up with a game-plan to get out of debt. I’m a big fan of Dave Ramsey myself and I have been following many of his debt reduction principles. Make a detailed list of your debts and come up with a payment plan.

Suggested Books About Debt & Money Management

Rather than give you a huge list of books to read, I’m going to share ONE book I highly recommend. It will help you develop a plan to get out of debt and manage your money effectively. It’s titled “The Total Money Makeover” and it’s written by Dave Ramsey. The information in this book is life changing, if you apply what you learn and follow his steps. You can order a copy here on Amazon.

Final Thoughts

In conclusion, these are my thoughts on MLM Debt. I don’t believe anyone should go into debt because of network marketing. If they do, it’s normally because (1) they aren’t doing enough income producing activities to grow their business, or (2) they are wasting money on unneeded expenses. If either of those describe you, I hope you will apply what you learned in this article and move forward with your network marketing business.

What are your thoughts about MLM Debt? Leave a comment below to let me know what you think. I look forward to hearing from you. Have a great day!

Suggested Articles
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  2. Small Business Tax Tips
  3. Common MLM Business Expenses
  4. Business Checking Account
  5. Advice for New Work from Home Entrepreneurs
chuck holmes


Chuck Holmes
Network Marketing Professional (since 2002)
Author, Blogger, & Entrepreneur

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2 thoughts on “MLM Debt: How to Avoid Debt in Network Marketing”

  1. I believe this is where many fail, it’s the make it or break it point. If those simple steps are followed a good steady flowing income will start. One thing that people also tend to do is not keeping the money in their business meaning they will spend it unnecessarily on personal things instead of putting it back in to create more income. The p&l is a great way to physically see and chart your growth. If need be always speak to your accountant to help you stay on track.

    1. Yes, the major benefit of our industry is the low monthly overhead. There honestly is no reason to go in debt. With a traditional business, you can invest five, six or even seven figures just to get started. Plus, you have a HUGE monthly overhead. Not so with network marketing. If people would actually do what they were taught, they would not lose money. You can’t lose money if your monthly overhead is just a couple hundred dollars and you are servicing five to ten customers and taking care of your team.

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